Literature Review Prompt

Beyond cultural distance: Switching to a friction lens in the study of cultural differences Author(s): Oded Shenkar Source: Journal of International Business Studies, Vol. 43, No. 1 (January 2012), pp. 12-17 Published by: Palgrave Macmillan Journals Stable URL: https://www.jstor.org/stable/41408886 Accessed: 25-04-2019 06:54 UTC

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RETROSPECTIVE

Beyond cultural distance: Switching to a friction lens in the study of cultural differences

Oded Shenkar

Fisher College of Business, The Ohio State University, Ohio, Columbus, USA

Correspondence: О Shenkar, 730A Fisher Hall, Fisher College of Business, 2100 Neil Avenue, Columbus, OH 43210, USA. Tel: +1 614 292 0083; Fax: + 1 614 292 7062

Received: 30 June 201 1 Revised: 18 August 201 1 Accepted: 30 August 201 1

Abstract

My 2001 article provided a critical review of one of the most popular constructs in international business, and in the management and business literature as a whole, namely cultural distance. It listed various illusions, implicit yet unsubstantiated and refutable assumptions that underpinned a construct set to capture the essence of cultural differences. The paper questioned the validity of the measure; the resultant findings obtained in such international business applications as foreign direct investment patterns, sequence, entry mode, and performance; and, ultimately, the wisdom of continuing the use of the measure and its underlying construct. In this retrospective, I review subsequent work that tested some of the original observations, the impact the article has had, and, in particular, how we can redirect research away from the static cultural distance paradigm toward the dynamic interaction of the actual entities that come into contact in international business.

journal of International Business Studies (201 2) 43, 1 2- 1 7. doi: 1 0. 1 057/j¡bs.20 1 1 .42

Keywords: cultural distance; cultural dimensions; cultural friction

BACKGROUND

The idea for the original paper (Shenkar, 2001) developed over a long period of time. It involved research and review of the literature in international business and in related areas, and a number of "critical incidents" that were as much the result of trial

and error as they were of systematic investigation. Taken together, these diverse processes produced an increasing sense of unease over how the scholarly community, myself included, has measured cultural differences and, in particular, how we have used the cultural distance index to study the impact of those differences on major international business phenomena. I have gradually come to realize that what we have been doing was not only superficial, lacking in substance and rigor, but was perhaps invalid or, at the very least, seriously flawed. This was not an easy conclusion to reach. After all, in over a decade since its introduction, the cultural distance measure developed by Kogut and Singh (1988) has become the field's standard-bearer, supplanting virtually all other modes of gauging cultural variations, including the prior concept of psychic distance.

It is difficult for me to recall when exactly I first came to identify the deficiencies of the cultural distance measure. I can vividly remember, however, an instance roughly two decades ago when, in one of my co-authored studies (Shenkar & Zeira, 1992), initial

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analysis showed that cultural distance had no discernible impact on role ambiguity, one of the key dependent variables in our study. When this finding was challenged by post-study interviews, we became suspicious, and after some brainstorming came to identify the aggregation of cultural dimen- sions as the culprit. Indeed, a reanalysis showed that differences on all four of Hofstede's (1980) constituent dimensions, when included separately in the regression, came out as significant, although with different signs, cancelling out their impact in the aggregate measure. This not only questioned the rigor of the aggregation, but has also raised another issue, namely that not all cultural differences were disruptive and dysfunctional, and that - contrary to the assumption embedded in the cultural distance concept - some could be, in fact, complementary and conducive to performance.

As more and more challenges to the cultural distance index emerged, I began to suspect the measure and, in time, the very concept of distance, as a valid representation of cultural differences, and as a predictor of impact on business phenomena. Inconsistent empirical findings in the application of the construct in a variety of settings should have alerted me and others even earlier to the problem, but did not. Why? There are a number of reasons. One is that there were other plausible explanations for the inconsistent findings, ranging from differ- ences in sampling and research designs to theore- tical deficiencies. A second explanation for failing to detect the faults of the measure at an earlier stage was more worrisome, namely the temptation to use a simple formula to gauge variations in the complex, intangible phenomenon called "culture." This temptation was simply too big to pass up, especially as it yielded a single quantitative measure that could be incorporated in a regression equation together with supposedly hard data variables, such as R&D intensity, producing what seemed to be seamless research. Equally worrisome was a third explanation, that the more it had been used, the more legitimacy was conferred upon the measure, so that subsequent authors justified its utilization by referring to prior usage. This pointed to a fundamental failure in the knowledge-building process that was bigger than any one measure, and constituted one motivation behind the 2001

paper. Although my primary motivation was to enhance

the rigor and depth of business research involving culture, I was also seeking to draw attention to other major concerns, among them what I saw as

an erosion of the interdisciplinary platform that is supposed to be a stalwart of international business research, and which underpins its strengths. Being "interdisciplinary" has become a popular mantra in business schools, joining "globalization" and "relevance" as catchy terms that are fashionably promoted while rarely practiced beyond the super- ficial. International business has a vital role in

exercising interdisciplinary research, but at present the field has not lived up to its full potential as a hub and model for such research. Unlike multi-

disciplinary research, which connotes borrowing from many disciplinary areas, interdisciplinary research requires the intersection and cross-fertili- zation of disciplines with the aim of extracting theoretical and methodological insights and syner- gies. Interdisciplinary research implies borrowing that is not cursory or haphazard, leveraging rather than merely acknowledging the diversity within each area, and is aimed at the eventual creation of a feedback loop from the borrower back to the originator. This necessitates much more than the mechanistic import of disciplinary content exem- plified by the cultural distance construct, which, as I have tried to illustrate, can do more harm than good.

AFTERMATH

Although the 2001 paper was extensively cited, its impact varied widely, not always producing the outcomes I had hoped for. I did not expect an immediate impact, but was disappointed, especially as other work published around the same time corroborated some of the points made in the article, for example, the distinct influence of the individual dimensions of culture (e.g., Pothukuchi, Damanpour, Choi, Chen, & Park, 2002) or the role of non-cultural mediators (e.g., Brouthers & Brouthers, 2001). At the same time, several authors appear to have taken the criticism to heart, as in the case of adopting cognitive measures of cultural differences (Chen, Kirkman, Kim, Farh, & Tangirala, 2010). Still, these efforts fell short of my hopes for redirecting research in the field. Worse, in quite a few instances, authors referenced the article to acknowledge that dealing with cultural differences was challenging, promptly proceeding to use the same measure I had argued against. There were other, more determined voices, however. For exam- ple, Kirkman, Lowe and Gibson (2006: 303) have lent empirical support to several of the illusions listed in the 2001 article, and came up with a strongly worded take-away, recommending that

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researchers "avoid further use of the overall cultural distance index."

In the meantime, efforts were under way to convince scholars of the merits of the original recommendations. Two subsequent studies tested the first illusion identified in the 2001 paper, namely that of asymmetry. The illusion was that the term "distance" connoted, by definition, symmetry - that is, that the distance from A to В was identical to the distance from В to A; yet there was no empirical evidence or logical or theoretical justification to support an assumption of symmetry. There was indirect evidence to the contrary, but not in the form of direct testing, so this was attempted in a study on expatriate adjustment led by my colleagues (Selmer, Chiù, & Shenkar, 2007). We confirmed asymmetry for German expatriates assigned to the US compared with US expatriates assigned to Germany: controlling for length of assignment, German expatriates were better adjusted, socio- culturally and psychologically, than the US expatri- ates. We await further studies that will test expatriate asymmetry for other national pairs, and which will expand the scope of research into other facets of selection, training, and performance.

In another firm-level study (Lee, Shenkar, & Li, 2008), we were able to confirm asymmetry by simultaneously studying the inward and outward international partnering preferences of South Kor- ean firms. We found that while cultural differences

did not significantly impact on the control prefer- ences of the Korean firms, the relationship was moderated by the direction of investment. This study was also aimed at highlighting another problem associated with the application of the cultural distance measure, that of confounding firm and environment. In other words, scholars often looked at the investment entity and the investment environment as if they were equivalent, in effect measuring distance between "apples" and "oranges." They did not consider, for example, that a Korean firm bringing a foreign partner to work within Korea faced a different cultural challenge than that faced by counterparts partnering with foreign firms on foreign turf. The same confusion of levels of analysis can be found in other cultural distance applications, attesting to the danger of veering away from actual transacting entities.

Finally, in another international human resource (IHR) article (Brock, Shenkar, Shoham, & Siskocick, 2008), we have gone beyond asymmetry, illustrat- ing that only certain cultural dimensions were impactful when it came to expatriate assignment,

which challenges the equivalence/aggregation assumption, as well as the autopilot focus on distance as opposed to nominal readings. In that paper, we found that MNEs hailing from high power distance/assertiveness cultures exercised tight control over subsidiaries in the form of expatriate assignment, regardless of whether the host country was high or low on those dimensions, showing that "distance" failed to capture the impact. Those findings served as a reminder that home-country culture was an important determi- nant of strategic and IHR decisions, an assumption once taken for granted in the literature, but one that seems to have been all but forgotten. Indeed, another broader concern revealed by the 2001 article was that the field has failed to build on

prior work, which became even more apparent in a subsequent review, which concluded that earlier research in the "psychic distance" tradition was in some ways (e.g., the consideration of non-cultural variables) richer and more rigorous than the latter stream of "cultural distance" research (Shenkar, Luo, & Yeheskel, 2008).

Finally, it was probably naive of me to expect an even deeper soul-search to result from my article, one that would touch on fundamental issues relating to the conceptualization and measurement of cul- ture, such as the ability to capture the phenomenon through a set of discrete dimensions (Bond et al., 2004; Gelfand, Erez, & Aycan, 2006; Usunier, 1998), the complexity of dealing with multiple levels of analysis (e.g., Klein, Dansereau, & Hall, 1994), or the appropriateness of using questionnaires as a singular data collection device (Smith, Peterson, & Thomas, 2008). This brings me back to the meaning, and value, of interdisciplinary research, and the risk of generic imports. If we do not learn the language of another discipline, not only will we not be able to eventually export knowledge to that discipline, but will also fail in a more fundamental sense by importing an ill-adapted good. International busi- ness scholars are more aware than any of the consequences of failing to adapt a product to a local environment, and we should not treat knowledge inputs differently.

THE WAY FORWARD

When I searched for yet more explanations as to why cultural distance retained its position as a popular concept despite increasingly glaring short- comings, I came to the conclusion that at least part of the problem was the use of "distance" as the base metaphor for capturing the essence of cultural

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differences, and their impact on international business phenomena. This became the basis for a paper (Shenkar et al., 2008) that constituted a meta- phorical analysis of the construct. In that paper, we argued that the appeal of cultural distance was at least partially rooted in the characteristics of the geographic "background metaphor," which con- noted a rational, objective and quantifiable gauge, and which avoided dealing with the "messier," but crucial aspects of meeting and interaction. Conse- quently, we suggested doing away with the distance metaphor in favor of another metaphor, that of friction. We noted that the friction metaphor provided a superior representation of what was arguably the heart of the matter in international business, namely the interaction between viable entities. We also discussed a number of repercus- sions flowing from this switching of metaphors, for instance that entry mode, traditionally the depen- dent variable in international business research, be also considered an independent variable, as differ- ent entry modes generated variable levels of friction. Much remains to be done, however, if we are to achieve this shifting of metaphors from "distance" to "friction."

One of the remaining challenges remains the measurement of friction, a necessary step if we are to achieve an eventual switching of measures as well as of metaphors. A study published by Orr and Scott (2008) showed how friction may actually occur. Although their focus was more on institu- tional distance than on cultural distance, the paper's zeroing-in on the actual interaction between specific actors rather than dwelling on their degree of separation is equally valid on the cultural front. Using 23 global projects, the authors illustrated the process by which entities meet and go through phases of ignorance, sense-making, and response. While falling short of providing direct quantitative measurement of friction, the paper showed the complexity of outcome associated with direct interaction of actual actors, and managed to capture tangible instances of friction, "critical incidents" that provided a visible substitute for the current sterile views encapsulated in the concept and measure of "distance."

Another paper dealing with friction (Luo & Shenkar, 2011) seeks inspiration in the disciplines originally associated with the concept, namely physics and mechanical engineering. The knowl- edge base in those disciplines is used to develop "laws of friction," as well as to remind readers that, in and of itself, friction is a neutral term

entailing a positive as well as a negative potential: too much friction will generate heat and resistance, but too little friction will bring about adverse consequences, for example, slippage, as is the case of a tire interfacing with the road. The paper also introduces "drag parameters," to include, in addi- tion to entry mode, workflow interdependence, the breadth of local stakeholders, the speed and stage of international expansion, and the depth of localization. Also discussed are "lubricants," namely elements with the potential to reduce friction at the point of contact (e.g., cultural sensitivity training). A friction formula is provided, although empirical work is yet to be conducted.

FINAL THOUGHTS

Looking at recent developments in international business, a switch to a friction lens seems more necessary than ever. As the actors in the foreign investment arena are transformed, the need to specify and ground them, and to capture the resultant interaction, becomes paramount. Take, for example, the sovereign wealth funds, which have been rapidly gaining in volume and clout, but which have the potential to generate a very different reaction in a host country than an investment by a business firm, especially one lacking a strong national identity. Holding other variables (e.g., a friendly vs a hostile takeover) constant, the cultural interaction generated in the case of the former will be much more intense than

in the latter case. Or think of the likely wave of Chinese foreign investment in the US against the background of increasingly tense relations between the two countries, at least one of which sees the culture of the other as a material threat. Only a perspective that embeds actual actors within their respective systems, as well as within their bilateral and contextual relationship, political as well as cultural (Shenkar & Arikan, 2009), is likely to capture the essence of the transaction; in contrast, clinging to a "distance" view will not only provide a limited tunnel vision but may well produce wrong readings as far as the nature, scale and scope of impact are concerned.

It will be a mistake to focus only on conceptual and methodological flaws of cultural distance, important as they are, or even on the vital work that remains to be done in developing and measuring cultural friction, without reassessing the very role of culture in our theoretical frame- works. The next front must also evolve around a

theory development effort. To start with, we should

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attend to something that has been taken for granted for too long, namely the tenuous connection between the construct of culture and the theoretical

frameworks into which it has been deposited all too often in an implicit, haphazard and questionable fashion, and whose latent assumptions are as proble- matic as those underlying the cultural distance construct. Take, for instance, transaction cost eco- nomics, which has become the most popular theore- tical platform from which to study market entry mode. Williamson's theory does not include culture as a theoretical construct, and in its various applica- tions culture has been conceived, when spelled out at all, by and large as a proxy for uncertainty. Although seldom if ever questioned, this is a very problematic assumption: there are numerous forms of uncertainty that have nothing to do with culture and cultural differences, and culture can be, at times, a harbinger of stability. As noted in the 2001 paper, the problem can be easily illustrated in the case of entry mode. Gatignon and Anderson (1988; see also Anderson & Gatignon, 1986) acknowledge that transaction cost theory can accommodate contrasting predictions: under high cultural distance, a firm may choose low control to compensate for its lack of local knowledge, relying on a local partner; or it may opt for tight control to reduce dependence upon agents whose actions are poorly understood. These contra- dictory predictions may represent a fundamental flaw in the transaction cost argument, but they may be the result of how cultural differences are positioned within the theoretical framework.

Similar questions regarding the theoretical role of culture may be raised regarding agency theory, where an intriguing question is whether and how cultural interaction alters the nature of the

principal-agent relationship; regarding resource dependence, where culture may be viewed to potentially cement a relationship as a substitute for actual dependence, or, in the presence of certain moderators, such as historical interaction (Park & Ungson, 1997), strain or sever it; or regarding institutional theory, where culture is surprisingly missing except in limited discussion

of the "normative pillar" of institutions. The same is true for indigenous international business theories. For instance, the Uppsala internationa- lization model incorporated psychic distance as a key construct (Johanson & Vahlne, 1977), and later Oohanson & Vahlne, 2009) it was positioned as a root of uncertainty, raising similar questions to those pertinent in the transaction cost applica- tion. Similarly, Dunning (2009) called for the injection of context into his eclectic theory, and cast culture in the potential role of triggering country-specific and firm-specific advantages, but we have yet to specify how this would happen within a multinational enterprise, or under what conditions advantages might be eroded rather than leveraged as an outcome.

The main point here is that until and unless culture is appropriately incorporated into the theoretical landscape, rather than reduced to ques- tionable and frankly indefensible proxies, worth- while efforts directed at increasing research rigor will have limited value. To get there, we will also need to revisit broader, fundamental assumptions, such as whether the narrow economic view of

institutions is the right prism for international business research (a resounding "no" in my humble opinion), and whether it should be substituted or supplemented by the more comprehensive view available from sociology and other areas (e.g., political science) that have all but disappeared from the theoretical radar screen of business

scholarship. Then again, only a truly interdisciplin- ary approach, one that seeks to learn from and work with other areas of study rather than naively import out-of-context inputs, will set us on the way of achieving the theory development we covet. This same approach can also turn us into knowledge exporters; after all, many of the problems endemic to the cultural distance construct similarly afflict such concepts as institutional distance, industry distance, technological distance, and organiza- tional distance, which are widely used in the organizational literature. Let international business lead the way.

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ABOUT THE AUTHOR

Oded Shenkar, Ford Motor Company Chair in Global Business Management and Professor of Management and Human Resources at the Fisher College of Business, The Ohio State University, where he heads the international business area, and is also a member of the Centers for Chinese Studies and for Near East Studies.

Accepted by John Cantwell, Editor-in-Chief, 30 August 2011. This paper has been with the author for one revision.

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